JPMorgan Chief Says Huge Trading Loss Was ‘Isolated Event’

Jamie Dimon, the chief executive of JPMorgan Chase, plans to tell lawmakers on Wednesday that a trading blunder that could result in losses as high as $5 billion was “an isolated event.”

“We will not make light of these losses, but they should be put into perspective,” he said in remarks prepared for a hearing of the Senate Banking Committee on Wednesday. “We will lose some of our shareholders’ money – and for that, we feel terrible – but no client, customer or taxpayer money was impacted by this incident.”

In his prepared testimony, Mr. Dimon revealed little about the nature of the trade. Instead, he maintained throughout the remarks that the bet soured when the chief investment office started taking on larger positions in mid-January.

The bank’s trading was an effort to address “new Basel capital requirements,” he said in the statement. The unit “embarked on a complex strategy that entailed adding positions that it believed would offset the existing ones,” Mr. Dimon explained.

The trades “morphed into something that rather than protect the firm, created new and potentially larger risks.”

In his written testimony, Mr. Dimon provided little clarity on the timing of the losses. He said only that the “positions began to experience losses in March and early April,” without indicating whether those losses were brought to his attention ahead of an April 13 conference call with investors when Mr. Dimon dismissed concerns about an outsize position as a “tempest in a teapot.”

The JPMorgan chief did sound a note of contrition, saying in his prepared remarks that the botched trades had “let a lot of people down, and we are sorry for it.”

Mr. Dimon also stressed that the bank had strong capital to withstand market swings and weather further losses. JPMorgan Chase, the nation’s largest bank, has capital ” among the highest levels in the banking sector,” he said.

The hearing on Wednesday is part of a broader Congressional examination of JPMorgan’s recent trading losses from complex positions tied to credit derivatives. An earlier hearing in June convened some of the bank’s main regulators, including the Federal Reserve and the Office of the Comptroller of the Currency.

In anticipation of the hearings, senior executives at the bank said that they expected Mr. Dimon to announce broad changes to the bank’s risk management. But Mr. Dimon did not disclose any major reshuffling in the prepared testimony. He did emphasize that the bank tapped Matthew E. Zames to replace the chief investment officer, Ina Drew.

Mr. Zames, 41, is an experienced trader with a history of grappling with risky situations. He served as a trader at Long-Term Capital Management, the hedge fund based in Greenwich, Conn., that blew up in 1998 and was rescued by Wall Street.

Alongside the appointment of Mr. Zames, Mr. Dimon said that Mike Cavanagh, a former chief financial officer at JPMorgan, was conducting “an extensive review of this incident.”

Mr. Dimon concluded his remarks on a positive note, saying, “We will learn from this incident and my conviction is that we will emerge from this moment a stronger, smarter, better company. “